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T.J. MAXX BUSINESS ACQUISITION
Formal Report, 2013
Prepared by Alexandra Guevara
Chief Consultant of Business Analysis
Report Distributed May 22, 2013
Prepared for
Knights Investment Group Directors Committee
KIG Corporation
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2013 T.J. Maxx Business Acquisition
ABSTRACT
This report thoroughly examines the T.J. Maxx chain with the purpose to acquire the retailer for
investment. Broken down into different sections, are the categories that make up the concluded
analysis. The main idea consists on why there is a need for investment in an off-retailer and what
can they offer if the proposal finalizes. This report focuses on the marketing strategy, which
includes a plan for investment, S.W.O.T analysis, amongst other key elements that evaluate what
the company is doing internally and how it highlights externally to those seeking investment.
Furthermore, the business analysis, which is broken down into past and future profit margins
displays their growth in numbers with the solid purpose of gaining a detailed look at the financial
standpoint of the company. This is the backbone for the company and their sub-categories
explain in detail their influence within each field.
The report commences by focusing on the start-up of this company by categorizing small
elements that summarize their goals and motives. Moving onto an exclusive marketing plan that
incorporates not only the strategy used to maintain a loyal base and rapid increase in revenue, but
it also provides their outlook on the internal base of the company. These elements have laid out
the foundation for the report itself by building a solid relationship between both the advertising
and public fields, demonstrating the steps gather to conduct a conclusion on the possible
acquisition of this off-retailer. The extensive research prepared for this report gathered sources
both internally and external, to educate the directors of KIG and for the further analysis and
observations.
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2013 T.J. Maxx Business Acquisition
TABLE OF CONTENTS
ABSTRACT ........................................................................................................................ 2
EXECUTIVE SUMMARY ................................................................................................ 4
INTRODUCTION .............................................................................................................. 5
BACKGROUND ................................................................................................................ 5
Fashion Forward Consumer ............................................................................................ 5
Off-Price in the Works .................................................................................................... 6
Business Expansion ........................................................................................................ 6
E-Commerce ................................................................................................................... 7
V.A.L.U.E FACT ................................................................................................................ 7
MARKETING STRATEGY ............................................................................................... 8
Social Media ................................................................................................................... 8
Advertisement ................................................................................................................. 9
S.W.O.T ANALYSIS ......................................................................................................... 9
COMPETITION ................................................................................................................. 9
ASSESMENT OF COMPANY’S FUTURE .................................................................... 10
Consecutive Growth...................................................................................................... 11
ANALYSIS METHODOLOGY ....................................................................................... 11
CONCLUSIONS AND RECOMMENDATIONS ........................................................... 12
REFERENCES ................................................................................................................. 13
GLOSSARY ..................................................................................................................... 14
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2013 T.J. Maxx Business Acquisition
EXECUTIVE SUMMARY
The Knights Investment Group has asked to conduct an analysis on the T.J. Maxx franchise. This
formal business report has gathered information from various sources to come up with the ideal
solution on whether or not acquiring this large company would benefit KIG. The focus of this
report is primarily on their financial and marketing which includes:
Marketing Strategy
S.W.O.T Analysis
Assessment of the Company’s Future
Each of these three categories carefully explain in further detail the strong points and the
weakness of the company provided above and the way they should be carefully assessed if
investment is to be considered in the future. The marketing strategy chosen demonstrates what
the company has already begun in terms of social media and advertisement. This is important
because as investors, there is no room for error and, by having a solid social media and
advertisement plan externally produced, it leaves room for profit without having to put internal
input.
The S.W.O.T analysis is very important to take into consideration. The reason being, it gives you
both the strengths and weakness from both sides of the company; internal and external. This lays
the foundation for the investor in terms of what needs to be address, changed, and viewed before
there is any arrangement. In the report itself, there are both internal and external strengths and
weaknesses for the investor to take into consideration.
The assessment of the company’s future is the financial assessment part of this report. The
graphs provided indicate the future growth of the company in terms on investor relations. Further
information found in the actual graph itself with an in-depth analysis explaining the logistics
behind this huge upcoming growth seen in the report, along with statistics and upcoming
forecasts. The remaining graph contains seventeen years of dividend growth up until the year
2014. What this graph shows is that there is an increased possibility that investing in T.J. Maxx
is at its peak point as of today.
Based on these conclusions, recommendations for acquiring the T.J. Maxx Company are (1) to
continue to assess the future financial growth of the company, (2) have an understanding of the
marketing strategy, (3) implement a S.W.O.T analysis on a yearly basis to ensure the company is
living up to their predicted outcomes. By following these three steps, assessing whether or not
this company is a suitable match for KIG should be by no means, a firm answer.
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2013 T.J. Maxx Business Acquisition
INTRODUCTION
Knights Investment Group (KIG) is a privately owned corporation looking to invest in a
company that has tremendous growth and provides outstanding leadership roles in its franchise.
As the leading consultant for KIG, executing a plan and establishing a recommendation that has
thorough background information on the desired company will provide an abstract on a plan for
investment.
This report will examine the T.J. Maxx Company as a plan for investment. Included in this report
will be an in-depth examination of this large retail chain with the purpose of assessing their
future profits in this leading field. T.J. Maxx, owned by the TJX Companies is the largest off-
price retail in both apparel and home fashions in the U.S and worldwide (TJX Company, 2013).
With over 35 years of history under their belt, T.J Maxx has produced outstanding retail
achievement and has introduced developmental ways of bringing variety to their customers.
The purpose of this report is to acquire the T.J. Maxx Company by conducting an S.W.O.T
analysis, which will give us an in-detail look at their past success to accumulate research and
provide an estimate of T.J. Maxx’s future assessment. As a consultant for KIG, I will be
providing a plan for conquering the desired company by providing graphs with the future growth
in the years to come.
BACKGROUND
Founded in Framingham, Massachusetts and a subsidiary of the TJX Companies, T.J. Maxx is an
off-price fashion retail chain that caters to the upper-middle class clientele (TJX Companies, p.
2, 2011). This massive outlet provides clothing and accessories including:
Women’s Apparel
Men’s Apparel
Footwear
Handbags
Accessories
Jewelry
Beauty
Activewear
Fashion Forward Consumer
T.J. Maxx is a leading retailer that has its focus primarily in the day-to-day fashion forward
woman. Being a fashionable investment in today’s economic aware society, investing in them
will bring:
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2013 T.J. Maxx Business Acquisition
1. Value-oriented consumers that are looking for good deals on brand name labels.
2. Operational glance at the production between the retailer and merchandiser.
Having a content customer base is the main priority and has always been part of the T.J. Maxx
plan. Reaching the loyalty of their consumers has increased their overall ratings amongst their
competitors, making them a valuable asset to KIG.
Compared to an oversize boutique, this large retail chain carries one of a kind pieces not found in
any of its competitors. Distinguishing themselves from the merchandise carried by others,
expanding to a global market, and keeping currents trends in top priority have expanded the
limits for this growing retail chain.
Off-Price in the Works
An average off-price consumer is one who will regularly visit a discounted store in search of
trending styles once featured in high-end retailers at an elevated price. As often as once a week,
these label hunters are on the lookout for their favorite brands.
Items at off-price stores are sold as cheap as 60% off their original value. The reason being,
many of these items are said to be from past seasons or just excessive merchandise from their
previous retailers. The true reason behind the low prices, according to USA Today is that,
“Department and specialty stores display clothes long before people usually have a need to wear
them, so when stores return merchandise that isn't selling to the manufacturers, the
manufacturers can easily turn around and quickly sell it to off-price stores in the same season”
(O’ Donnell, 2011).
Although there has been a lot of speculation whether or not T.J. Maxx sells old season products
or not, CEO Carol Meyrowitz commented, “85% of what the stores sell is from the same season
and same year it was designed for, and 85% is purchased directly from manufacturers”
(O’Donnell, 2011). Having these distinctions amongst its off-price competitors gives T.J. Maxx
the opportunity to climb up the leader boards. Meyrowitz calls it, “Opportunistic buying”
(O’Donnell, 2011).
Business Expansion
T.J. Maxx has expanded their business to over six continents. This retail chain has growth from
both their national and international locations. Moving to the international market benefited the
company by providing vast growth in annual sales, production, and product. Besides their
outstanding growth within their own chain, the TJX Companies has also acquired stores such as
Marshalls and HomeGoods, which has produced millions of dollars in annual revenue per
retailer. According to TJX Annual Report, “Annual net sales reached $23.2 million, a 6% growth
from the previous year” (p.2, 2011).
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2013 T.J. Maxx Business Acquisition
Due to their acquisition of international locations, T.J. Maxx has opened the door for a wider
demographic reach in various locations throughout U.S and abroad. T.J. Maxx continues to open
more stores in influential cities across the United States such as Wall Street in New York City
(TJX Companies, p.5, 2011).
E-Commerce
In the 2011 T.J. Maxx annual report, the company has said to begin their process of beginning an
e-commerce to increase customer base and lever their business up $23 billion with the addition
of e-Commerce (p.3, 2013). The following list provides the advantages of adding e-commerce to
the company.
Profitable Accounts: an online addition to this already powerful retail chain will gain
profitable accounts with other retail outlets and recognition of potential partnerships with
suppliers.
Online Acquisitions: Buying out online merchants, facilitating the sourcing of
merchandise, and proving the 700 buyers a beneficial product attainment.
New acquisition of Sierra Trading Post has been said to bring profitable expertise and will began
to be promoted during the half of 2013 according to the TJX Investor Handout (TJX Companies,
slide 3, 2013).
V.A.L.U.E FACT
The V.A.L.U.E fact establishes their social corporate responsibility, as well as what the company
believes they stand for:
Vendor Social Compliance
Since 2005, T.J. Maxx has conducted over 65 extensive training programs for their vendors,
buying agents, and management at factories whom produce TJX products (TJX Responsibility
Report, p.17, 2013) Investment in training produces expertise knowledge in the buying field adds
to the quality and production.
Attention to Governance
Mentioned in their Code of Ethics, “TJX is committed to the highest standards of ethics” (TJX
Responsibility Report, p.21, 2013). This means, operating in a responsible manner by following
guidelines that ensure staff, shareholders, and vendors are their main priority.
Leveraging Differences
Being a multi-cultural company that embraces diversity throughout the company, and outside
including their vendors to create worldwide connections and begin to establish long-term
relationships.
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2013 T.J. Maxx Business Acquisition
United with our Communities
“T.J. Maxx considers every neighborhood in which we do business to be our community” (TJX
Responsibility Report, p.35, 2013) Giving back to those who have supported their stores and
created profitable business is what united with the community implies to the company.
Environmental Initiatives
T.J. Maxx beliefs everyone should have an “important role in the environment” (TJX
Responsibility Report, p.49, 2013). They have been working on projects within their own stores
to manage electrical and water outlets.
MARKETING STRATEGY
“Fashion direct from designers and savings directly to you”
Their 2010 campaign open the door for T.J. Maxx to branch out into a bigger power by taking
the everyday “Fashionista”, and making her a “Maxxinista”. This is a great example of how T.J.
Maxx is using social media effectively to branch out into fashion-forward off-retailer. T.J. Maxx
builds upon their reputation of offering their customers high-priced items for a fraction of the
price. Advertising with social media in mind targets consumer savvy buyers that understand the
benefit of an off-price retail store.
Social Media
The following list includes all the social media applications T.J. Maxx has promoted both on
their website and on a worldwide level:
Instagram: takes the trendy shoppers into a quick glance of their latest style trend
reports.
Followers: 19,500
Facebook: used to gain costumer comments on their latest purchases, holds weekly
contests, and advertises any trending merchandise.
Followers: 1.3M
Pinterest: fashion journal in which others can pin their “Maxxinista” clothing into their
own closets for further advertising.
Followers: 13,504
Twitter: builds personal relationships with their consumers through interaction.
Follower: 83,715
Keeping up with the latest social media outlets has been another resourceful venture since social
media plays a huge role when looking into profitable companies to invest due to their influence
on the consumers.
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2013 T.J. Maxx Business Acquisition
Advertising
T.J. Maxx has certainly found their place in this bargain-hunting market economy. Customers
who continually shop at T.J. Maxx agree that trendy items do not need to be purchased at full-
price retailers because this one-stop shop can supply them with all their clothing needs. Due to
this fact, customers believe they are shopping smart; therefore, the advertising plays off their
testimonies. T.J. Maxx has been very cleaver with their “Maxxinista” campaign by including
style experts and worldwide bloggers to introduce their new campaign.
S.W.O.T ANALYSIS
The analysis provided the by the S.W.O.T is a marketing strategy used to implement the further
assessment of the company. As with any company, there is always room for improvement. The
analysis of T.J. Maxx was formulated based on the annual report.
Internal Strengths: Daily discounted items up to 20-60% off, items are usually within
the same season, twice a week shipment of items, national and international recognition.
External Strengths: Rapid increase for store demand in various demographic areas,
affordable, overseas brand development, new social media development.
Internal Weaknesses: Weak in-house staff training, store organization and development
of layout.
External Weaknesses: Poor brand advertisement, past lawsuits.
Internal Opportunities: online retail (e-commerce), international expansion, yearly
growth, profitable investments.
External Opportunities: larger consumer base, rapid economy growth, various investing
opportunities.
Internal and External Threats: Rapid consumer change, competitive market, growth of
counterfeit merchandise.
COMPETITION
According to Hoovers (2012) the top three competitors of T.J. Maxx are:
Target Corporation
Kohl’s Corporation
Ross Stores Inc.
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2013 T.J. Maxx Business Acquisition
Although these competitors fall under similar categories, T.J. Maxx is still the number one
leading off-retailer. The economy’s downturn brought stores such as T.J. Maxx into new heights
due to the population looking for bargains. Keep in mind, these are off-retailer outlets, not
including full-price stores.
ASSESMENT OF COMPANY’S FUTURE
Figure 1.0 Courtesy of Nasdaq
The chart in Figure 1.0 provided an estimate of the company’s 5-year growth beginning with the
year 2008 until 2013. The chart has shown slow growth in the year 2009 but rapidly escalating in
numbers by 2010 and reaching 45.00 in 2013. After carefully assessing the table below, Nasdaq
came up with the following predictions for the years 2013-2014:
According to the percentages above, T.J. Maxx will have an outstanding EPS growth of 23.9% in
the year 2013 giving the Knights Investment Group a perfect opportunity due to the company’s
escalating profitability and power for investment shares. In 2014, the profitability of investment
drops 12.5% giving KIG a head start if we are to invest in the year 2013. As stated by USA
Today, T.J. Maxx has only been down once in their 36 years—in 1995 (2011). With the
economy shifting rapidly, an increase in consumer awareness has brought light into this retail
chain.
As commented by Fox Business, during the first fiscal quarter in 2012, T.J. Maxx had already
increased their profits by 36% in comparison to 2011 (Booton, 2012). As mentioned in the
previous paragraph, it was only in 1995 when T.J. Maxx did not produce a high profit in
F2013 EPS Growth: 23.9%
F2014 EPS Growth: 11.4%
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2013 T.J. Maxx Business Acquisition
comparison to their other years in business. “Analysts are looking for higher fiscal 2013 earnings
of $2.39 a share and second-quarter profit of 51 cents” (Booton, 2012). These analyses conclude
huge marginal profits in the long-run.
Consecutive Growth
The chart below, courtesy of TJX indicates the company’s consecutive growth in a 17-year span.
Part of investing into a company is to give careful examination to this chart to consider what part
of the share, if acquired, the shareholder will receive. The dividend is the amount that the
shareholder gets within the financial year.
Courtesy of TJX Companies
As the concurring growth of the shareholders continues to expand in the following years to
come, TJX will provide:
The ability to manage a stock in a shifting economy
Establish capitol within the company itself
ANALYSIS METHODOLOGY
This formal report consisted of careful research and examination both containing primary and
secondary sources. The strategic plan used to gather the information on T.J. Maxx consisted of:
1. Scheduling a time and date for the research to initiate.
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2013 T.J. Maxx Business Acquisition
2. Building an outline that included all the parts discussed above.
3. Formatting the layout of the report accordingly.
A lot of the information found came from business websites that have previously analyzed the
company. An example of this is found in the graphs used in the body of the report. The
information gathered, backed up by sources was analyzed according to those specific measures.
In the report itself, there are sections in which the base of the analysis comes primarily from my
own background understanding and assessment of the company.
The information incorporated in the report was mostly past and future statistics. The reason
being, it is a business report and the main purpose is to analyze if the company chosen has future
growth and investment potential. The only expert gathered information from was from T.J.
Maxx’s own CEO, Carol Meyrowitz. Having her voice within the report gave a lot of insight in
many aspects such as fashion retailing to business. Other sources, as mentioned, have been
business related websites that although, they have not been peer-reviewed, either came from T.J.
Maxx’s annual report, or their corporation handouts. Other additional sources were Fox Business
and USA Today.
CONCLUSIONS AND RECOMMENDATIONS
The T.J. Maxx Companies have seen incomparable revenue growth throughout their history in
the retail atmosphere. An exceptional example of what an off-brand retailer should incorporate in
their day-to-day operations, this company has exceeded the expectations of the report provided.
The research conducted in the report has proven to be an effective strategy in regards to the
acquisition of T.J. Maxx.
According to my own analysis of the company, I do believe acquiring T.J. Maxx as an
investment for the Knights Investment Group would be an enormous step into the off-retailer
atmosphere. This company has proven itself to have remarkable growth within the national and
international market. They have also shown to be a leader in the retailing field, by producing
extraordinary merchandise availability and their ability to morph into the new economy.
One thing to keep in mind, the economy will be fluctuating, as it has been doing for the past few
years now. Investing in a company that has withstood the hardships and even the roughest side of
the economy, will benefit KIG by means of not only revenue and growth, but the public relations
component of the corporation will outstandingly increase. It is not only smart to acquire this
company, it is essential for KIG to re-invent their image and lay out a foundation for future
investments.
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2013 T.J. Maxx Business Acquisition
REFERENCES
Booton, J. T.J. Maxx Profit Climbs 36% on Comp-Store Sales Growth. Fox Business.
Retrieved May 16, 2013, from http://www.foxbusiness.com/industries/2012/05/15/tj-
maxx-profit-climbs-36-on-comparable-sales-growth/
Divident [Def. 1]. (n.d.). Investopedia. In Investopedia. Retrieved May 22, 2013, from
http://www.investopedia.com/terms/d/dividend.asp
EPS [Def. 1]. (n.d.). Investopedia. In Investopedia. Retrieved May 22, 2013, from
http://www.investopedia.com/terms/e/eps.asp
Fiscal Year [Def. 1]. (n.d.). Investopedia. In Investopedia. Retrieved May 22, 2013, from
http://www.investopedia.com/terms/f/fiscalyear.asp
O’Donnell, J. Behind the bargains at T.J. Maxx, Marshalls. USA Today. Retrieved May 16,
2013, from http://usatoday30.usatoday.com/money/industries/retail/story/2011-10-25/tjx-
ceo-carol-meyrowitz/50916340/1
Our History. TJX Companies. Retrieved April 18, 2013, from
http://www.tjx.com/about_history.asp
The TJX Companies, Inc. Hoovers. Retrieved April 18, 2013, from
http://www.hoovers.com/company-information/cs/company-
profile.The_TJX_Companies_Inc.54741cf926
The TJX Companies Inc. Corporate Responsibility Report. (2011). Retrieved from,
http://thomson.mobular.net/thomson/7/2968/4514/document_0/TJX_CSR11.pdf
(2013). TJX Companies Investor Handout March [PowerPoint Slides]. Retrieved from:
http://www.tjx.com/files/pdf/TJX-Investor-Handout-March2013.pdf
T.J. Maxx Companies Inc. 2011 Annual Report. (2011). Retrieved from,
http://thomson.mobular.net/thomson/7/3301/4645/document_0/TJX_AR_2011_FINAL.p
df
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2013 T.J. Maxx Business Acquisition
GLOSSARY
Dividend: A distribution of a portion of a company's earnings, decided by the board of directors,
to a class of its shareholders. The dividend is most often quoted in terms of the dollar amount
each share receives (dividends per share).
Earnings Per Share: The portion of a company's profit allocated to each outstanding share of
common stock. Earnings per share serves as an indicator of a company's profitability.
Fiscal Year: A period that a company or government uses for accounting purposes and
preparing financial statements. The fiscal year may or may not be the same as a calendar year.